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commodity spreads - buying from outright future contracts or is it a specific market?
Be VERY careful if you use stop losses, if the spread volume and liquidity are thin. Your stop could easily be picked off, or it might be subject to a lot of slippage. It can be just like using stops in thin regular markets (OJ and lumber for example).
One enticing part of spreads is the use of SPAN margins, which are a lot less. But those positions can move against you quickly, too.
I am not a spread trader, but I have asked among some of my customer and they recommended Genesis Trade Navigator. We support this platform via the Rithmic Data Feed.
I have attached a chart I was able to pull for the Crush Spread; Soy Meal and Soy Oil
Again, I am not a spread trader and maybe others would be able to pull out charts on other platforms.
Matt
Trading futures and options involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. You may lose more than your initial investment. All posts are opinions and do not claim to be facts. Please conduct your own due diligence. Use only Risk capital when trading Futures.
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"I use IB as broker" For futures calendar spreads such as (CL Jan - CL Mar) what is the
IB margin? It should be much less than the outright futures? Also does IB quote the calendar spreads as a
single price, and eliminate the need for legging?
Thanks in advance.
I do not have an IB account any more, and, thus, cannot give you the exact figures regarding margin.
Margin for a futures calendar spread definitely is significantly lower than for an outright future, as long as the expiration dates of the two futures are not too far from each other (= several years).
And, yes, you can place an order for a calendar spread in Crude Oil, and do not have to leg in.
Most of the futures calendar spreads I trade in the meats. As meats can only be stored to a very limited extend futures with different expiry date often almost trade as independent futures.
Sometimes I trade calendar spreads in the grains and beans - there are classical spreads (old crop vs. new crop like the SN-SX) which get a lot of attention.
But I rarely traded calendar spreads in the energies.
I work with DeCarley and with RJO. DeCarley offers the best service I ever received from a broker. RJO supplies excellent reports on various commodities. I trade medium and longterm, and often hold positions for weeks or months. Thus, commissions are not as important for me as for daytraders.
If you can live with an average service and pay for good reports, IB certainly is fine as well. (I left them as a large part of my trading is option selling, and they do not support this way of trading.)
I prefer to work with more than one broker to reduce third party risk.
